Natural rubber prices at record high

Natural rubber prices at record high

Natural rubber (NR) prices reached Rs 220 a kg on strong global cues coupled with high demand across the world. This is the first time that the local market crossed the Rs 220-a-kg mark. In Bangkok, prices were Rs 25 higher that the Indian counters at Rs 245 a kg.
The nourishing global market along with reports of low production and rising crude prices led to hoarding by growers. Futures counters also indicate a much stronger market in March and April, as prices may reach Rs 240 a kg. So, according to local traders the market would remain bullish for the next couple of months and prices may cross Rs 250 a kg.
The huge gap in the domestic and global trading prices favours exports and indications are now bright for a rise in exports in the coming months. The rubber-based industries, especially the tyre industry are now facing a serious crisis as imports are not viable even at a reduced duty of 7.5 per cent. To their dismay, supply in the local market is meagre and whatever comes to the market is being absorbed immediately.
It is really a growers paradise now. As the main season in production comes to a halt by the end of this month, growers are reluctant to immediately sell their stock. They are holding stock so as to fetch maximum price as the prices are rising daily. This affects the supply and the rubber-based units are worse hit. Even at higher prices, they are not able to keep the inventory steady.
The demand for the commodity is rising sharply globally. Apart from India and China, demand is on a rise in the US and Japanese markets too.
Growers said production would continue during the summer also due to the high prices. Therefore, fall in production during the offseason is not expected this time. Meanwhile, the stock in the market is rather weak and it is not conducive with the Rubber Board estimates. The Board estimated a stock of 261,000 tonnes, but market sources said the actual available stock would be below 100,000 tonnes.



Rubber May Extend Rally on Supply Squeeze, Demand, Analysts Say

Natural rubber, which has beaten other commodities this year, may extend a record rally as rains cut supply, compounding a seasonal output drop, while climbing car sales boost demand, according to analysts and fund managers.
The commodity will “rally until the price reaches a point that will substantially weaken physical demand,” said Tetsu Emori, a commodity fund manager at Astmax Co. in Tokyo, who correctly forecast in September a rally to a record. “It’s hard to predict where that level is; it may be 600 yen,” Emori said.
Futures surged to an all-time high yesterday, touching 454.4 yen per kilogram ($5,480 per metric ton) on the Tokyo Commodity Exchange, extending last year’s 50 percent jump. The advance raises costs for tiremakers such as Bridgestone Corp. and boosts inflation as other commodities including grains, metals and crude oil climb. The price may advance to 500 yen in the first half of the year, according to the median forecast of four analysts and fund managers surveyed by Bloomberg News.
The “rally won’t stop until shipments from Thailand increase,” said Hisaaki Tasaka, an analyst at Tokyo-based broker ACE Koeki Co., who also predicted in September that the price would rally. “Rubber futures may climb to 500 yen per kilo by June as supply falls short of rising demand.”
Rubber gained as much as 9.6 percent in Tokyo this year, beating the returns of members in the S&P GSCI Commodity Index through to the close of trade on Jan. 12. The cash price inThailand, the largest supplier, has also gained to a record, reaching 164.8 baht ($5.41) per kilogram yesterday.
Global Deficit
Natural rubber will be in deficit in 2011 for a second year, according to a November estimate from Niels Fehre, an analyst at HSBC Trinkaus & Burkhardt AG, who wasn’t part of the survey. Global demand of 10.7 million tons may outpace supply by 513,000 tons this year after a shortage of 417,000 tons in 2010, according to an HSBC report.
“Although prices keep rising, demand remains strong as buyers are accelerating purchases ahead of the low-production period and Lunar New Year holidays,” Sureerat Kunthongjun, an analyst at AGROW Enterprise Ltd., said by phone from Bangkok. The week-long holiday in China runs from Feb. 2.
Heavy rain from a La Nina weather event, which has also brought floods to Australia, has hurt rubber-tapping across Southeast Asia. During the so-called wintering season, which starts next month and runs until May, Thai rubber output usually shrinks as much as 60 percent from peak levels, the Association of Natural Rubber Producing Countries said in December.
“Rising car sales have improved optimism that demand for car tires will remain robust, outpacing inadequate supplies,” said Wanwilai Choilek, manager at the Hadyai, Thailand branch of commodity broker DS Futures Ltd.
China’s passenger-vehicle sales surged 33 percent in 2010, according to the China Association of Automobile Manufacturers. Total vehicle sales rose 32 percent to 18.06 million.
Bridgestone Europe, a unit of the biggest tiremaker, raised prices by an average of 6 percent, citing higher costs, according to a statement on Jan. 10. “We have not seen an end to the escalation of raw-materials prices,” said Makio Ohashi, chief executive officer and president of Bridgestone Europe.



Rubber rocks!!
atural Rubber prices at the Colombo Rubber Auction yesterday rocketed to new heights amidst soaring international demand and rising crude oil prices.
The Latex Crepe 1X hit Rs.618.25, up from Rs.9 and the average price a kilo traded was Rs.615.25 against Rs.610 from the last auction held two days back.
Commenting on the high price scenario, Sunil Poholiyadda, chief executive of Namunukula Plantations, one of the listed rubber producing companies in Sri Lanka said the current rubber prices are mainly backed by adverse weather conditions prevailing in the rubber producing countries.

"January and December generally are the highest cropping months. But the heavy rains to the rubber producing nations such as Thailand and Sri Lanka have badly affected the production in these two months" Poholiyadda said.
"I strongly feel this is a supply and demand situation. The Chinese and Indian auto markets are currently seen an unprecedented growth. Majority of the natural rubber produced in the world are used to manufacture tyres" he added.
The International Rubber Study Group's (IRSG) report on the sale of passenger car tyres indicates that the change in sales had been -3.9 % growth in 2009, but forecasted to be 10.9 percent growth in 2010 and 5.8 percent growth in 2011
In the case of light commercial vehicle tyres, the change in growth had been -3.5 % in 2009 but forecasted growth in 2010 is 11.2 % and 8.1% in 2011. The change in the medium heavy commercial vehicle tyres growth had been -7.6% in 2009 and forecasted sale is 15.4% growth in 2010 and 8.5 % growth in 2011.
He also noted that the along with natural rubber prices, synthetic rubber prices are also on the rise, as the world crude oil prices are gradually pricking up.
According to international media reports, the appreciation of the Yuan also has contributed to the high demand for natural rubber, as it will help the world's second largest economy to cut its import costs on natural rubber,
China, which let the Yuan rise 3.6 % in 2010, is expected to allow the currency to rise about 5.4 % against the dollar in 2011 to combat inflation.



RPT-Tyre makers buy Indonesian rubber at record prices, RSS3 sol

Jan 14 (Reuters) - Major tyre makers purchased Indonesian rubber at record prices above $5 a kg for March shipment, while top consumer China was also in the market to stock up on fears that prices would rise further, dealers said on Friday.
Bridgestone Corp , Michelin and Goodyear Tire & Rubber bought SIR20 at 239.50 U.S. cents a pound to 240 U.S. cents ($5.28 to $5.29 a kg) for March delivery. There were no details on the amount. (Reporting by Lewa Pardomuan; Editing by Manash Goswami)


ANOTHER PRICE HIKE BT TYRE CO'S IN THE OFFING
KOCHI (Commodity Online) : With the rubber prices climbing in domestic and international markets, the tyre companies are contemplating a price rise.
Analysts say that a hike in the range of 3-5% is being expected.
"Of course, we are under pressure due to rising prices of rubber in the domestic market. We are monitoring the raw material prices and if rubber prices go up then it will push tyre prices too," RK Agarwal, head of marketing, Modi Tyres, told Moneylife.
Ceat, Bridgestone and Apollo Tyres had hiked prices 1%-2% in December.
Rubber prices reached Rs. 216 a kg in the Kottayam and Kochi markets in Kerala on Tuesday. Kerala is the biggest producer of rubber in India.
A slump in the output of major rubber producing States internationally has increased the prices at least by 25% in the past three months.
A steep increase in tyre prices in the order of 8-10% is however ruled out, though only such a measure would actually save the industry from a shrink in profits. Chinese competition is the deterrent here, analysts contend.
In the April-December period in 2010, tyre companies had hiked prices by 12%.



Cos reduce natural rubber consumption

KOCHI: The sustained rise in natural rubber prices is slowly affecting it consumption. Substitution of natural rubber by synthetic rubber and the new trends in the transportation sector could be the reasons for this change.
Consumption of natural rubber by all user industries fell by 3% in November 2010. Provisional figures show that in December it fell by 1.3%.
The consumption by tyre sector saw a 4.3% fall in November and a 3% fall in December, pointing towards a similar substitution of natural rubber by synthetic. “Earlier, we used to consume 74% natural rubber and 26% synthetic rubber,” said Rajiv Budhraja, director general, Automotive Tyre Manufacturers Association.



Rubber May Extend Record Rally as Rain Limits Output, Hurting Bridgestone

Natural rubber, which has beaten other commodities this year, may extend a record rally as rains cut supply, compounding a seasonal output drop, while climbing car sales boost demand, according to analysts and fund managers.
The commodity will “rally until the price reaches a point that will substantially weaken physical demand,” said Tetsu Emori, a commodity fund manager at Astmax Co. in Tokyo, who correctly forecast in September a rally to a record. “It’s hard to predict where that level is; it may be 600 yen,” Emori said.
Futures surged to an all-time high yesterday, touching 454.4 yen per kilogram ($5,480 per metric ton) on the Tokyo Commodity Exchange, extending last year’s 50 percent jump. The advance raises costs for tiremakers such as Bridgestone Corp. and boosts inflation as other commodities including grains, metals and crude oil climb. The price may advance to 500 yen in the first half of the year, according to the median forecast of four analysts and fund managers surveyed by Bloomberg News.
The “rally won’t stop until shipments from Thailand increase,” said Hisaaki Tasaka, an analyst at Tokyo-based broker ACE Koeki Co., who also predicted in September that the price would rally. “Rubber futures may climb to 500 yen per kilo by June as supply falls short of rising demand.”
Rubber -- which traded at 450.2 yen per kilogram at 12:13 p.m. in Tokyo today, reversing a 0.5 percent decline -- has gained as much as 9.6 percent this year, beating the returns of members in the S&P GSCI Commodity Index. The cash price in Thailand, the largest supplier, has also risen to a record, reaching 164.8 baht ($5.41) per kilogram yesterday.
Global Deficit
Natural rubber will be in deficit in 2011 for a second year, according to a November estimate from Niels Fehre, an analyst at HSBC Trinkaus & Burkhardt AG, who wasn’t part of the survey. Global demand of 10.7 million tons may outpace supply by 513,000 tons this year after a shortage of 417,000 tons in 2010, according to an HSBC report.
“Although prices keep rising demand remains strong as buyers are accelerating purchases ahead of the low-production period and Lunar New Year holidays,” Sureerat Kunthongjun, an analyst at AGROW Enterprise Ltd., said by phone from Bangkok. The week-long holiday in China runs from Feb. 2.
Heavy rain from a La Nina weather event, which has also brought floods to Australia, has hurt rubber-tapping across Southeast Asia. During the so-called wintering season, which starts next month and runs until May, Thai rubber output usually shrinks as much as 60 percent from peak levels, the Association of Natural Rubber Producing Countries said in December.
‘Improved Optimism’
“Rising car sales have improved optimism that demand for car tires will remain robust, outpacing inadequate supplies,” said Wanwilai Choilek, manager at the Hadyai, Thailand branch of commodity broker DS Futures Ltd.
China’s passenger-vehicle sales surged 33 percent in 2010, , according to the China Association of Automobile Manufacturers. The country’s automobile market will almost triple to 40 million vehicles, with half the world’s production based in the Asian nation by 2020, the Financial Times said today, citing Beijing Automotive Industry Holding Co. President Wang Dazong.
Bridgestone Europe, a unit of the biggest tiremaker, raised prices by an average of 6 percent, citing higher costs, according to a statement on Jan. 10. “We have not seen an end to the escalation of raw-materials prices,” said Makio Ohashi, chief executive officer and president of Bridgestone Europe.



Smallholders gain but processors suffer from higher rubber prices

KUALA LUMPUR: While the record high rubber prices augur well for smallholders, local rubber manufacturers and processors are pressured by the increasing cost of natural rubber (NR), said Plantation Industries and Commodities Minister Tan Sri Bernard Dompok.
To minimise the impact of high cost of raw material on downstream operators, he said the Government would be looking at several steps to help stabilise rubber prices.
Tyre-grade SMR 20 is currently traded at about RM15.76 per kg while Latex-in-Bulk about RM10 per kg.
Dompok was speaking to reporters after chairing a dialogue session between the ministry officials, Malaysian Rubber Board and other rubber industry representatives yesterday.
He said Malaysia would still need to import its NR supply from major producers like Thailand and Indonesia to support its thriving rubber downstream sector.
However, Malaysia would continue to maintain its rubber area at one million ha while focusing, among others, at increasing its national average rubber productivity and sustainability of the upstream sector.
Earlier, during the dialogue session, the government rubber agencies and industry representatives were briefed on the performance of the rubber industry in 2010 and given an overview of NR prices.
Issues on the higher operating capital for rubber processors and product manufacturers were also discussed at length.
For rubber processors, high rubber prices have impacted the factories as the much higher operating capital had also increased interest charges in terms of sourcing of cup lumps as well as in financing the required stocks in the factory.
Some processers encounter problems in securing bank financing. There have also been incidents of significant financial losses among processors.
As for rubber product manufacturers, many were also struggling from the higher cost of production, said Malaysian Rubber Glove Manufacturers Association president K.M. Lee. He told StarBiz on the sidelines after the dialogue session that a stronger ringgit made rubber gloves, mostly sold in US dollar, more expensive while the upward trend of latex concentrates would further erode rubber glove makers' margin.